Yesterday’s article focused on the oil and gas industry of Russia, today we look at the other sectors of Russia. If a peace agreement is reached and sanctions come off, will businesses rush to Russia?

In an article by Patricia Cohen of the New York Times News Service, there is a thought that businesses will not rush in quickly as Russia has changed in the last 3 years of war with Ukraine.

The country’s war-driven economy is struggling with a 21% interest rate, labor shortages and a shrinking number of middle-class consumers.

According to a database complied by the Yale School of Management, more than 1,000 corporations have left or curtailed operations since the sanctions were imposed.

Agathe Demarais, a senior policy fellow at the European Council on Foreign Relations, said the Russian business environment is extremely difficult, the risk of expropriation is high and the Russian economy is not booming.

The companies that have stayed in Russia don’t fully control their revenues and assets. Companies deemed unfriendly by the Kremlin often had to sell their businesses for pennies on the dollar and pay a 35% surcharge deemed voluntary to the government. Those companies that remained could not legally send profits outside Russia.

Western firms such as Danone, Carlsberg and German state energy company Uniper had their assets seized.

While Russia has great amounts of oil and gas, its trade before the war was 1.7% of the world’s total output.

Most multinationals in Russia earned no more than 1% of their global revenues in there, according to researchers at Yale, but there are always exceptions.

Linking to dividend paying stocks, in every country there is opportunity, the issue is how much profits can be made? There are markets in every country, but there is easy money to be made and harder. It will likely be European companies move forward before American ones when there is peace.

There are more questions than answers, till the next time – to raising questions.

If President Trump is successful in bringing a peace between Ukraine and Russia, one of the affects will the scrapping of economic sanctions the western countries have placed on Russia. If one looks at Russia from an economic point of view, it has tremendous oil and gas reserves. There was a reason why Russia was the favored country by Europe to buy oil and gas. The infrastructure is in place and the government needs to sell oil and gas to recover the Russian economy.

In an article by Stanley Reed of the New York Times News Service, the question is will western companies rush in when sanctions are lifted. At one time, Pepsi out sold Coca-Cola in Russia, will they come back?

Before the sanctions were put on, and after the USSR fell apart the 3 biggest players in the Russian oil and gas fields were BP, Shell and ExxonMobil.

ExxonMobil was working in Russia’s far east near Sakhalin Island and worked on it for over 20 years. However, in a 2023 regulatory filing, it wrote off the project of $4.6 billion as management deemed the carrying value of the asset not recoverable. During this 20-year period, ExxonMobil was considered to have a relatively good relationship with its Russian partner Rosneft, the state-controlled oil company.

The energy giants, whose projects take years to complete, would also need to be convinced that they would not wind up facing new restrictions in a few years in the event of a change in the government in the US or renewed aggression by Russia.

Tatiana Mitrova, a research fellow at Columbia University’s Center on Global Energy Policy asked why would the majors rush back in when they have attractive opportunities in the world including Gulf of Mexico near Guyana and Brazil?

One company that could go back to Russia is TotalEnergies of France. The company wrote off $14.2 billion on its Russian business in 2022 and has continued to import LNG from a facility called Yamal that it helped develop in the Russian Arctic with Novatek, a Russian company which Total owns 19% stake.

Smaller companies such as SLB formerly Schlumberger, as a company that continues to work in Russia providing training and hydraulic fracturing and other supports.

Linking to dividend paying stocks, all companies operating outside of borders see markets and opportunities and with it comes global risks. Sometimes the risks are in favor of the company, sometimes it against, but where do they see opportunity to maintain margins?

There are more questions than answers, till the next time – to raising questions.

Every week there are government data that is released and has an effect on the stock market. In general people know the big numbers because they are reported on news sites such as the CPI or consumer price index. Is inflation increasing or decreasing? what will be the effect on interest rates? and the list goes on. The role of the government is to collect the information and then release it to the general public, which can do with it as they like.

In an article by Matt Lundy of Reuters, in recent years economists have raised concerns about companies and consumers shunning surveys to produce vital information about business conditions. But in the early days of the Trump administration their worries have shifted trusted data is disappearing.

The Trump shut down information of websites to comply with gender, diversity and other matters. The slashing of costs of government has also made government data suspect.

People who do use government data from hedge fund managers, to researchers, to students, public health, business owners.

The disappearance of data has wide ranging effects. Government produce reports that the private sector cannot replicate. The statistics inform everything from academic research to corporate decision making, said Erica Groshen, a former commissioner of the US Bureau of Labor Statistics (BLS) which is part of the Labor Department.

In order to produce the report it relies on the goodwill of the participation of households and businesses to fill out surveys with private information. If the response rate falls the economic data will be less reliable.

Linking to dividend paying stocks, all companies are concerned with data, in larger companies it is big data both from internal and external sources. There is a mixture to paint a larger picture of what is happening to determine what the company should do in the future or make capital allocations. t is reasonable, if the data from the government is suspect to ask about how decisions are being make and relied on.

There are more questions than answers, till the next time – to raising questions.

Most people live in urban areas and as more people move around the urban areas, they tend to get crowded, or congestion begins. 50 years ago, the thought was to build new highways and that would solve the problem. The issue is it does for the first few years, but soon the new highways are congested, and the road system thoughts begin again. Ideally there is a mixture between transit and the road system which allows people soon level of choice. There are advantages and disadvantages to taking the car and riding transit for the individual and society at large. One suggestion that seems to successful in London, England is to bring in congestion pricing system on vehicles. This solution tends to send more people to transit either subway or the commuting train system.

In an article written by Philip Marcelo of the Associated Press, the city of New York has imposed a congestion price on vehicles through a $9 toll if the car enters Manhattan neighborhoods south of Central Park. The city says city traffic has brought modest but measurable traffic reductions.

When governments get elected, they often know what they do not like. The Trump administration through the US Transportation Secretary Sean Duffy will work to stop the tolls.

The other side of the issue is the state government through the Metropolitan Transportation Authority which runs the New York subway and other public transit. The MTA had plans to use the money from the tolls to issue bonds that would fund billions of dollars in improvements and repairs to the city’s creaky and cash strapped transit system which carries 4 million riders daily.

Who funds the transit system when all governments are cutting back expenditures?

Linking to dividend paying stocks, when governments are in place during the first 100 days, they often know what they do not want, but not necessarily what they do want. After 100 days, it will be their job to find solutions, because they are now responsible. There are always tradeoffs in government policies, and it is up to the private sector to find the opportunities in the tradeoffs. After the 100 days, the administration should signal what it does like and what kind of regulations it will or will not impose and then companies can try to work within the system until the next election. For dividend paying stocks, the ideal is to work beyond the election cycle to see the opportunities that will allow to continue making profits to pay dividends.

There are more questions than answers, till the next time – to raising questions.

President Trump likes tariffs, he sees them for many things, and he has implemented tariffs before. He may do them again, but given he has done them before, what were the results?

In an article by Jason Kirby and Mark Rendell of Reuters, the short answer was higher prices for consumers and pain for American manufacturers.

A 2024 paper by David Autor, Anne Beck, David Dorn and Gordon Hanson found that few jobs were created in the protected sectors. Import tariffs on Chinese and on goods had neither a sizable nor significant effect on US employment in regions with newly protected sectors. Foreign retaliatory tariffs had clear negative employment impacts particularly on agriculture, and these harms were only partly mitigated by compensatory subsidies.

While the 2018 tariffs didn’t do much to significantly boost jobs, they did boost prices.

A recent study by the US International Trade Commission assessed the impact of the steel and aluminum tariffs on production, prices and downstream industries. It estimated prices went up 2.4% in steel and 1.6% in aluminum.

US Steel and aluminum producers ramped up production after the tariffs, $1.5 billion more steel and $1.3 billion more aluminum. However, the tariffs had a significant negative impact on downstream industries.

Industrial machinery, cutlery, and auto parts and manufacturing were all hit hard causing a decrease in production values of $3.4 billion.

The biggest beneficiaries of the tariffs in 2018 were American steel producers, whose profits surged.

Linking to dividend paying stocks, similar to all government actions there will be winners and losers. In the case of steel and aluminum, the story is 2018 was if you owned the producers that is a good thing, if you own the companies that use the materials that was a negative thing. If President Trump goes ahead with his proposals, be sure to evaluate your holdings and make adjustments.

There are more questions than answers, till the next time – to raising questions.

When Henry Ford started selling vehicles, he wanted to be vertically integrated and every part of the car which came off the line of the Rouge Plant in Detroit was made by Ford. This created a lot of jobs and as long as the Model T was the number one seller, it was not a problem. Similar to many companies that do not innovate much after it has a number one position, competition continued as well as Ford’s demand you can buy any Model T you want as long as the color is black. Eventually, that sentiment and others led to the decline of Ford and the rise of GM.

GM’s rise led to the management system of the President of GM called the Alfred Sloan which led to the GM system which held that every income group needed their own vehicles. Given the pricing and 5 car systems of Chevrolet, Pontiac, Buick, Oldsmobile and Cadillac the idea was the more income you earned, you would move to a different vehicle in the GM System. It worked till the difference between the cars was more cosmetic than anything else as GM was using the same base for the different brands. Eventually GM stopped producing some of the brands, because consumers saw limited value.

The next phase was the introduction of Japanese cars into the US marketplace. At first the autos were inexpensive, but broke down often. Then the quality improved and US quality went down, soon people switched to Japanese brands. If you know someone who has a Japanese brand and their odometer is above 100,000 miles, the Japanese brand often is expected to go further than the US brands. Part of the reason was the Japanese system was the car company put together the parts, but they were made by supplier companies whose purpose was to produce good parts. The US companies agreed with the system and moved to putting things together and the rise of supplier companies to the auto companies. All the 3 major auto companies spun out their supplier companies to stand alone businesses and only put things together under a just in time process. This also saved them on inventory costs.

The supplier companies are both innovative and cost driven. This means when NAFTA was signed and then ratified again by the USMCA agreement, whatever country or state has the greatest benefit, the car companies and their suppliers would locate in that country. The system developed that integration was important aspect of the system. Another aspect is the number of jobs in the manufacturing of vehicles has gone down because of the use of robotics. A manufacturing company supplying the auto industry used to be worth 10,000 plus jobs, now the number is 3,000 and declining.

In an article by Eric Atkins of the Globe and Mail, an across the board tariff that President Trump has proposed would devastate the US auto industry according to Ford CEO James Farley.

The tariff would send costs up that would be needed to be passed on to consumers in the form of higher prices and it helps South Korean, Japanese and European companies who would not be subject to the Mexican and Canadian tariffs.

Sherry House, Ford’s CFO said about 90% of the company’s steel and aluminum comes from US sources. However, many of Ford’s suppliers use international metals that would be subject to the tariffs and that sends up costs to Ford. The higher costs would be expected to higher prices and likely job cuts and inflationary pressures.

Linking to dividend paying stocks, the most important aspect of a company is the allocation of capital to produce a return on investment. The allocation of capital is broken down to short, medium and long-term investments. No one allocates capital to build up manufacturing for the next administration to change the rules. It is the reason why companies like a sense of stability, they need to allocate capital under the existing rules, not hopefully what the rules will be in 5 years’ time. It is the reason why most companies would cut their long-term capital allocations, to buy back stock or return dividends in the hope that stability returns to the marketplace.

There are more questions than answers, till the next time – to raising questions.

Everyone has a favorite place to eat away from home. It depends on many things how often you go there, but everyone has a favorite. Often times, a favorite is a fast-food place because they are easy to find and deliver a consistent meal. One of the reasons they are easy to find is the bigger fast-food companies have many franchises or operations.

In an article written by Savyata Mishra of Reuters, the biggest franchise company is McDonald’s. By 2027, they hope to have 50,000 restaurants around the world. Sales in the global department rose in the 4th quarter, aided by demand for its cheaper items and discounted offerings from diners in the Middle East, Japan and China.

Domestically in the US, McDonald’s sales were down 1.4%.

Value meals is helping McDonald’s recover traffic from the lower-income consumers, but will they drive stronger earnings in the long-term? wonders Northcoast Research analyst Jim Sanderson.

Chief Financial Officer Ian Borden says the fast-food industry overall still faces challenges with low-income consumers.

Quarterly adjusted earnings per share of $2.83 were in line with market expectations.

Linking to dividend paying stocks, often times the list of what companies to buy starts at what do you consume? then the homework begins, for example how many locations does it have? have you been to more than one? was it consistently good? who is the retailer aiming at? and the questions continue…

There are more questions than answers, till the next time – to raising questions.

If you went to war, eventually you would target the other side’s infrastructure. The infrastructure creates jobs and ensures goods and services move around freely. The other side of the coin is by disrupting infrastructure, you break supply chains and cause delays. After the war, there would be a need to recreate the infrastructure along friendly lines. When the infrastructure is back in place, other aspects of living return to what was normal. For countries to control others, controlling the infrastructure is a key.

In an article by Andrius Sytas and Janis Laizans of Reuters, the Baltic states of Estonia, Latvia and Lithuania completed a switch from relying on Russia’s electricity grid to the EU system.

European Union (EU) President Ursula von der Leyen, said the switch took years in planning and marked a new era of freedom for the region.

The reliance on Russia’s electricity grid had been on the EU’s to do list for decades and every time, Russia invaded Ukraine, first in 2014 and again in 2022, the action gained momentum.

The Russian system IPS/UPS network was built in the 1950’s. The 3 countries emerged as independent nations after the USSR broke up in the 1990’s and joined the EU in 2004.

Linking to dividend paying stocks, there are industries which can be turned around on a dime and there are others that turn similar to the longest oil tankers. The companies that take time to turn around tend to be regulated more often, which means the government is giving them a semi monopoly like position. The infrastructure as up front capital cost to build, but once in place allows for revenues to surpass the interest on the debt and as long as the maintenance is reasonable, can generate cash flows which flow to the investor. Those are good companies to invest in.

There are more questions than answers, till the next time – to raising questions.

One of the rules in investing is to be cynical. Every company and government has a public relations facility and they all use them. Often times they will be at competing sides, and each side has a different narrative. When a government talks about waste, they often mean, those that do not agree with us. In a democracy, there are supposed to be competing sides and generally something in the middle is taken because there both sides can be correct, but both sides can exist for the benefit of government regulations.

In an article by Douglas Gillison of Reuters, the Trump administration has stopped the work of the Consumer Financial Protection Bureau (CFPB). If you go in person to a bank, you will see the signs on the door. The CFPB is funded through member banks, trust, credit unions, etc. The idea is if someone believes the bank is doing them harm, they can go to an agency which can investigate to see if harm is done. Many times, if harm is being done to one, then it is being done to many. The CFPB also battles those around the banks including financial institutions which are predators, scammers and crooks. We all know, when the solid, dependable financial institutions start acting like predators, it is relatively easy to juice up a quarter or improve bonuses. This is when the CFPB sets in and it has won judgements of nearly $20 billion in financial relief for US consumers. (seemingly also everyone has been sued and paid fines). Some of the smallest independent financial banks have been rarely fined.

It is the exception for financial services companies not to be have been fined, they have a tendency to wish the CFPB to go away. If it does consumers will lose, because many companies pay fines, say they will change and then see in their database – we have X amount of customers, if we could receive 2% more in fees we will easily meet financial expectations and they add a fee to get the 2%.

Linking to dividend paying stocks, the theory is because they have been in business for a long period on time and can pay dividends, they need to cheat the system less. If you look through the lawsuits which have been filed, invariably most companies have lawsuits filed against them. Ideally the dividend paying companies learn from the lesson and move forward in their service to customers. When you read the press releases, be aware there are 2 sides with different views.

There are more questions than answers, till the next time – to raising questions.